Herman Miller Reports Fourth Quarter and Fiscal 2016 Results
Webcast to be held Thursday, June 23, 2016, at 9:30 AM EDT
NOTE: A data supplement with additional financial information relating to the periods covered by this press release is available for download at hermanmiller.com/Investors.
Herman Miller, Inc. (NASDAQ: MLHR) today announced results for its fourth quarter and fiscal year ended May 28, 2016. Net sales in the quarter totaled $582.6 million, an increase of 5.8% from the same quarter last fiscal year. New orders in the fourth quarter of $606.2 million were 8.9% above the prior year level.
Herman Miller reported diluted earnings per share of $0.67 in the fourth quarter. This compares to diluted earnings per share of $0.39 in the same quarter last fiscal year. Excluding the impact of certain non-recurring gains associated with the sale of property, a dealership divestiture and tax planning, adjusted diluted earnings per share in the fourth quarter totaled $0.56. In the fourth quarter of last fiscal year, the company reported adjusted diluted earnings per share of $0.47.
For the full fiscal year, net sales were $2,264.9 million, reflecting a year-over-year increase of 5.7%. Diluted earnings per share for the full year totaled $2.26 compared to $1.62 last year. On an adjusted basis, diluted earnings per share totaled $2.17 in fiscal 2016. This represents an increase of 19.2% over adjusted earnings per share of $1.82 in fiscal 2015. The company estimates that foreign currency translation unfavorably impacted its full year earnings per share by approximately $0.13 in fiscal 2016.
The company also announced an increase in its quarterly cash dividend to $0.17 per share payable in October 2016. This change represents an increase of over 15% from the current dividend payout of $0.1475 per share.
Brian Walker, Chief Executive Officer, stated, “Strong net sales and order growth were a clear highlight of our results this quarter, capping a full fiscal year that set an all-time record level of sales for our company. We also delivered a year-over-year increase in adjusted earnings per share of 19% in the fourth quarter. Our fifth dividend increase in the past four years reflects the confidence of the Board and our leadership team in the power of our long-term strategy to create shareholder value. These results are a tribute to the talent and effort of our people and they demonstrate the meaningful progress we have made on our strategic priorities.”
Fourth Quarter Fiscal 2016 Financial Results
Herman Miller’s consolidated gross margin in the fourth quarter totaled 38.7%, a 60 basis point improvement over last year’s fourth quarter gross margin of 38.1%.
Herman Miller reported operating expenses in the fourth quarter of $168.6 million compared to $161.7 million in the same quarter a year ago. This represents a year-over-year increase of $6.9 million, the majority of which relates to spending on new product launch and marketing initiatives, higher incentive accruals, product warranty expenses, and variability from higher net sales. The expenses in the current period also reflect the benefit of pre-tax gains totaling $6.1 million related to the sale of a former manufacturing facility in the United Kingdom and the divestiture of the company’s dealership in Australia.
Herman Miller’s effective income tax rate in the fourth quarter was 24.9% compared to 29.5% in the same quarter last fiscal year. The effective tax rate was lower than the prior year primarily related to the impact of a favorable transfer pricing adjustment totaling $2.0 million recorded in the quarter. As this transfer pricing benefit reflected the full year benefit for fiscal 2016, approximately $1.5 million ($0.02 per share) of the benefit was not attributed to the quarter in the calculation of adjusted earnings per share.
The company ended the fiscal year with total cash and cash equivalents of $84.9 million, an increase of $29.6 million from the balance at the end of the third quarter. Cash flow generated from operations in the fourth quarter and full fiscal year was $84.5 million and $210.4 million, respectively. This compares to $57.9 million and $167.7 million in the respective periods last fiscal year.
Jeff Stutz, Chief Financial Officer, noted, “We finished fiscal 2016 on a strong note, posting our highest quarterly sales and order levels in the past fifteen years. Gross margin remained a key contributor to operating performance for the quarter, reflecting favorable commodity costs, production leverage and operational improvements from our ongoing lean enterprise focus. We also benefited from tax planning that helped to meaningfully reduce our consolidated effective tax rate. These factors drove strong cash generation and return on invested capital, which totaled approximately 22% for the full fiscal year.”
Segment Sales and Orders Results
North American Furniture Solutions
Sales for the quarter within Herman Miller’s North American reportable segment were $332.9 million, an increase of 7.6% from the same quarter last fiscal year. New orders in the fourth quarter totaled $358.6 million, representing an increase of 11.5% from last year.
ELA Furniture Solutions
Net sales within the ELA segment totaled $110.5 million in the fourth quarter of fiscal 2016. This represents a 7.4% increase from the same quarter last fiscal year. New orders in this segment totaled $101.7 million in the fourth quarter, representing a year-over-year increase of 8.9%.
Net sales in the fourth quarter within Herman Miller’s Specialty segment totaled $61.6 million. This represents an increase of 3.7% over sales in the same quarter last year. New orders in the fourth quarter of $61.7 million increased 6.6% compared to last year.
The Consumer segment reported sales of $77.6 million, a decrease of 1.6% compared to the same quarter last fiscal year. Orders in the quarter of $84.2 million were slightly higher than the same quarter in the prior year.
First Quarter Fiscal 2017 Guidance
Looking forward, Herman Miller expects net sales in the first quarter of fiscal 2017 to be in the range of $600 million to $620 million. This would represent an increase of between 6% and 10% from the first quarter of fiscal 2016. It is important to note that the first quarter revenue estimate includes the impact of an additional week of sales based on the company’s accounting calendar – a change required periodically to re-align the company’s fiscal periods with the calendar months. On an organic basis, adjusted for the impact of the extra week and dealer divestiture, this forecast implies sales growth of approximately 3% at the mid-point of the range. Diluted earnings per share in the quarter are expected to range between $0.60 and $0.64.
Supplemental Information, Video Presentation and Webcast
The company has created a supplemental data report which provides additional information relevant to its quarterly results. This document can be accessed via a link on the Investors section of the company’s website.
The company has developed an investor overview video presentation which provides further information on the company’s strategy and outlook that can be accessed via the company’s website at www.hermanmiller.com/investor-overview-june-2016.
The company will host a live webcast to discuss the results of the fourth quarter of fiscal 2016 on Thursday, June 23, 2016, at 9:30 a.m. ET. To ensure your access to the webcast, you should allow extra time to download the streaming software necessary to participate. An online archive of the presentation will be available on the website later that day.
The full text of Herman Miller’s 4Q16 earnings release, including all tables, is available at www.hermanmiller.com/about-us/investors.html
About Herman Miller
Herman Miller is a globally recognized provider of furnishings and related technologies and services. Headquartered in West Michigan, the global company has relied on innovative design for over 100 years to solve problems for people wherever they work, live, learn, and heal. Herman Miller’s designs are part of museum collections worldwide, and the company is a past recipient of the Smithsonian Institution’s Cooper Hewitt National Design Award. Known and respected for its leadership in corporate social responsibility, Herman Miller has been included in the Dow Jones Sustainability World Index for the past 12 years, and has earned the Human Rights Campaign Foundation’s top rating in its Corporate Equality Index for the past nine years. In fiscal 2016, the company generated $2.26 billion in revenue and employed over 7,000 people worldwide. Herman Miller trades on the NASDAQ Global Select Market under the symbol MLHR.